September 17, 2015

A push in the Legislature to reduce the restrictions on school districts’ budget reserves faltered last week after a coalition of school organizations fractured over proposed compromises.

Senate Bill 799 remained stuck in an Assembly committee on Friday, the last day of the session. It will resurface next year, and negotiations will continue, said Dennis Meyers, assistant executive director for the California School Boards Association.

At issue was a disagreement over how far the school organizations should compromise on their bill, which sought a total repeal of the cap on district reserves that legislative leaders and Gov. Jerry Brown imposed, at the urging of the California Teachers Association, as part of the 2014 state budget.

The cap would force districts to spend down money they put aside for economic uncertainties, emergencies and other purposes, like future computer purchases, whenever the state put money into a new rainy day fund for K-12 and community colleges. Although deposits into that fund are predicted to be infrequent – and probably won’t be made in the next several years – the California School Boards Association and other school management groups, including the Association of California School Administrators, complained that the cap potentially threatens districts’ financial stability and their credit ratings, and contradicts the state commitment to local control.

“We too loved SB 799, but one of the first rules is don’t fall in love with your bill,” said Dennis Meyers, California School Boards Association.

Last month, the school boards association-led coalition, which included some children’s advocacy groups, the League of Women Voters and the California State PTA, proposed an alternative to a repeal: SB 799 would exempt from the cap districts with less than 2,501 students, whose finances can be the most volatile, along with property tax-rich districts, called basic aid districts, which rely solely on local property taxes to pay their bills. For other districts, the cap on reserves would be raised to 17 percent, nearly triple the average 6 percent that the Legislature imposed. The new limit would be in line with the minimum reserve that a national oversight organization recommended.

Along with the prime authors, Senate Democrats Jerry Hill, D-San Mateo, and freshman Steve Glazer, D-Orinda, 15 Republican and Democratic legislators signed on as co-authors. But, sensing the bill was still in trouble, CSBA resumed negotiations on its own with the California School Employees Association, the union that represents hourly school employees, such as custodians and teachers aides. Those discussions led to a new proposal that would have set the maximum cap for most districts at 12 percent, midway between the current limit and SB 799’s 17 percent, and removed the exemption for many basic aid districts. It also would have required school boards to give a monthly accounting of money in reserves that districts assigned for specific purposes that didn’t count toward the cap under SB 799.

Those proposed changes didn’t go over well with members of the coalition, who were presented with them two days before the final day of the session. The California Associations of School Business Officers, with 3,000 members, wrote SB 799’s sponsors saying the proposed changes “are a step in the wrong direction and would erode the fiscal safety net to schools.” The California State PTA issued an alert to all legislators saying it would not support further amendments or an alternative to SB 799. The Association of California School Administrators didn’t officially oppose the proposal because it hadn’t seen the actual wording, but Executive Director Wes Smith said he also made it clear to legislators that his organization couldn’t support changes to the bill that it hadn’t reviewed and approved.

Molly McGee Hewitt, executive director of the school business officers organization, said she opposed all three “ill-conceived” changes. She expressed concern that the proposed concessions would make it harder to hold the line on passing SB 799 intact.

But Meyers said everyone acknowledges that repeal of the reserves cap “is not really in the cards,” so the goal is to significantly weaken the law. “We too loved SB 799 (as originally written),” he said, “but one of the first rules is don’t fall in love with your bill. Everyone needs to be open to any changes so that a bill that can get signed.”

Comments Policy

el4 years ago4 years ago

The unions are just wrong on this.
Sunshine and disclosure makes sense. The blanket prohibition does not. It doesn't allow for savings for future needs and it encourages the creation of budgets with money hidden in dark corners that can be used to save the day later.
I remind everyone that the size of a reserve is unrelated to current year spending. That is, it is possible to be deficit spending with regard to one's annual revenues … Read More

The unions are just wrong on this.

Sunshine and disclosure makes sense. The blanket prohibition does not. It doesn’t allow for savings for future needs and it encourages the creation of budgets with money hidden in dark corners that can be used to save the day later.

I remind everyone that the size of a reserve is unrelated to current year spending. That is, it is possible to be deficit spending with regard to one’s annual revenues and have say a 25% reserve. Reserves are one time money. The assumption that districts are deliberately creating larger and larger reserves every year out of current year income is not supported.

In a small district, enrollment volatility and other factors can change projected income by 10% easily in a single year, not to mention that unexpected expenditures can do the same. Students and employees benefit by stability to the program – reserves allow districts to keep staff on and programs running when times are unexpectedly tight.

Stephen P. Blum, Esq.4 years ago4 years ago

As always good reporting from Mr. Fensterwald.
This whole issue of reserves is an example of education decisions that effect children being driven by money and power. As this dispute has unfolded, seldom has what is in the best interest of children been mentioned.
Unions slipped this budget cap in at the end of a budget cycle. A clever move, but not good public policy. It appears they were seeking … Read More

As always good reporting from Mr. Fensterwald.
This whole issue of reserves is an example of education decisions that effect children being driven by money and power. As this dispute has unfolded, seldom has what is in the best interest of children been mentioned.
Unions slipped this budget cap in at the end of a budget cycle. A clever move, but not good public policy. It appears they were seeking to force districts to spend down reserves and make some or all of this money availiable for bargaining.
School districts want to hold on to their authority to decide what is best and prudent. They resist yet another law limiting their ability to run the district as they see fit.
What is best for students does not appear to be a large part of the discussion.
Perhaps the state has addressed the issue from the wrong direction. Every year the state allocates dollars to each school district. It is assumed, the legislative intent of these dollars is that they are spent on the district’s current students, not students years in the future. Instituting a “spending floor” might be a better way of addressing this thorny issue. For example, require districts to spend a minimum of 98% of the allotted funds each year on its current students. District could still wisely put some money aside for that “rainy day”, but would be required to spend most of the funds on the students it presently serves.
In any case, it is sad to see all this bickering over who has the power and who gets to decide how money is spent or saved. Working together to solve problems would be a better strategy. Over six million students are counting on those in power to do the right thing.

Parent4 years ago4 years ago

On one hand if district build up reserves then the state will "borrow" the money again with deferrals.
On the other hand employees don't want reserves - they want the money to come to them.
In any case any given union teacher's "reserve" is all the teachers that have less seniority than them - as they will get chucked before that teacher gets laid off. Read More

On one hand if district build up reserves then the state will “borrow” the money again with deferrals.
On the other hand employees don’t want reserves – they want the money to come to them.
In any case any given union teacher’s “reserve” is all the teachers that have less seniority than them – as they will get chucked before that teacher gets laid off.

Denise Jennison4 years ago4 years ago

As I feared, the coalition put its best offer on the table up front and had nowhere to go. There was really no room for further compromise. Total repeal remains the best outcome. Absent that, the context of SB799 was a compromise with which we could live; anything further would have diluted the outcome to a point where it did not serve its intent. Politics getting in the way of doing what's right for kids... … Read More

As I feared, the coalition put its best offer on the table up front and had nowhere to go. There was really no room for further compromise. Total repeal remains the best outcome. Absent that, the context of SB799 was a compromise with which we could live; anything further would have diluted the outcome to a point where it did not serve its intent. Politics getting in the way of doing what’s right for kids… at its finest. Pure disgust on my part. Local control or not?

Tom4 years ago4 years ago

Indeed, politics again getting in the way of what is best for the kids. To put a point on it, big union money and reelection endorsements influencing fiscal decisions to favor adults over children. Disgusting, shameful, and immoral.